Can someone explain
Discussion
Can someone please help me figure out why a local chap to me who is fairly high up in BMW (I think he's manager of a few dealerships) always has a brand new BMW on the drive?
I know the obvious, it's a company car and obviously being high up he can take his pick, be it a X5M, M3, 6 series etc, but how does it work?
He gets the cars brand new, 0 miles, and from what I understand they don't get used as demonstrates. So, how can BMW justify giving him a brand new 50k car, which after a few weeks use has 1000 miles on it, and presumably is now worth 40k...Just how are they justifying it, is it tax reasons, use depreciation as an expense? It's not just this chap either, I've a mate who also gets a brand new car every 6 weeks from BMW, only a 1 series or a mini but he shoves a couple of thousand on the clock and then just swaps for another one....
For reference, he currently has an F10 M5 sat on the drive, they are in high demand and I simply can't figure out why they use them to lose money!
Help my simple brain
I know the obvious, it's a company car and obviously being high up he can take his pick, be it a X5M, M3, 6 series etc, but how does it work?
He gets the cars brand new, 0 miles, and from what I understand they don't get used as demonstrates. So, how can BMW justify giving him a brand new 50k car, which after a few weeks use has 1000 miles on it, and presumably is now worth 40k...Just how are they justifying it, is it tax reasons, use depreciation as an expense? It's not just this chap either, I've a mate who also gets a brand new car every 6 weeks from BMW, only a 1 series or a mini but he shoves a couple of thousand on the clock and then just swaps for another one....
For reference, he currently has an F10 M5 sat on the drive, they are in high demand and I simply can't figure out why they use them to lose money!
Help my simple brain
I am not an expert at all, and someone is bound to come along and put me right soon, but I always thought they were the demonstrator cars. The dealership has "bought" them and registered them as the cars given to potential customers for test drives etc, and the senior folks get to take them home instead of leaving them at the dealership. Hence why they're always well-specced desirable models, as it'll encourage a potential customer better than a base-spec one.
Please tell me if I'm talking claptrap here.
Please tell me if I'm talking claptrap here.
davepoth said:
If you are BMW, it doesn't make sense to buy company cars from Hyundai. They get them at cost, and sell them on at cost plus, so I doubt they actually lose any money in spite of the horrendous depreciation.
Yea I can see that, but surely the managers can plod around in a 1 series rather than an M5, I'd rather try make as much as possible rather than lower (or is it raise) the loss!I can tell you now that even though the car is woth 50k, it will not have cost him that much and then he will sell it at a profit whenever he tires of it. I know one dealer principal who receives a brand new M3 every year and sells the previous car as second hand and makes a very nice profit on it.
All manufacturers have a variety of programmes through which dealerships are either required or are able to self register vehicles.
Demonstrator vehicles are probably the most constant requirement across the various marques. A franchise will require a dealer to have a specific mix of the range available as demo's in order to achieve the dealers operating requirements. To assist in this the franchise will offer the dealer additional discount or per unit support. For example an Astra may have 9% front end margin and 5% back end. Vauxhall may pay unto another 20% demo support plus allow the unit to qualify for volume bonus at 1/4 end.
As pre registration has grown, so have the number of registration options;
Demo
Courtesy car
Rental
Body shop
Try before you buy
"pack" purchase
Etc.
The boss tends to run the pick of the fleet.
Demonstrator vehicles are probably the most constant requirement across the various marques. A franchise will require a dealer to have a specific mix of the range available as demo's in order to achieve the dealers operating requirements. To assist in this the franchise will offer the dealer additional discount or per unit support. For example an Astra may have 9% front end margin and 5% back end. Vauxhall may pay unto another 20% demo support plus allow the unit to qualify for volume bonus at 1/4 end.
As pre registration has grown, so have the number of registration options;
Demo
Courtesy car
Rental
Body shop
Try before you buy
"pack" purchase
Etc.
The boss tends to run the pick of the fleet.
Pre-registration.
The dealerships have targets set by BMW, so, for example, they may be targeted to sell half a dozen M5s in a quarter. Failure to meet targets results in a loss of bonus from BMW to the dealership. Therefore, dealerships often buy the cars themselves because it enables them to make the bonus which outweights any hit they might take on buying a car and then selling it as almost new.
That's the reason you often see cars for sale in main dealers with under 10 miles on the clock but if you buy it you will be the 2nd owner.
The dealerships have targets set by BMW, so, for example, they may be targeted to sell half a dozen M5s in a quarter. Failure to meet targets results in a loss of bonus from BMW to the dealership. Therefore, dealerships often buy the cars themselves because it enables them to make the bonus which outweights any hit they might take on buying a car and then selling it as almost new.
That's the reason you often see cars for sale in main dealers with under 10 miles on the clock but if you buy it you will be the 2nd owner.
tjob said:
So, how can BMW justify giving him a brand new 50k car
It's NOT a £50k car, simple.It will cost a punter £50k sure, but not to BMW.
When your neighbour has "finished" with the car, it could go to someone else at the dealership to use, ultimately as a demo until it sells maybe.....
All of the above, plus you've got to remember it's part of their package. So they get use of a company car in place of money, so it's not really costing them, it's a very efficient way to make up part of their package.
If the member of staff in question is a Director, then they're hardly going to take a One Series, and BMW wouldn't want them to. I would imagine the company car scheme can also be a useful way to get feedback on the models, make the staff 'brand advocates', make sure they know the product etc.
Even car rental companies often replace cars after 6 monhts, if it makes sense for them, it must make even more sense if you make the cars!
If the member of staff in question is a Director, then they're hardly going to take a One Series, and BMW wouldn't want them to. I would imagine the company car scheme can also be a useful way to get feedback on the models, make the staff 'brand advocates', make sure they know the product etc.
Even car rental companies often replace cars after 6 monhts, if it makes sense for them, it must make even more sense if you make the cars!
We get a very good rate on brand new motors. Which, after 3 months can be replaced. We're told its to keep the second hand market figures higher and car sales higher.
They only get say 2-4k put on them, and then get sold at dealers with a reduced price. The employee is happy as they get a new car every 3 months at a (heavily) discounted price. The brand is happy as they are getting loads of (barley) used cars into the market, that people will bring back time after time for services.
They only get say 2-4k put on them, and then get sold at dealers with a reduced price. The employee is happy as they get a new car every 3 months at a (heavily) discounted price. The brand is happy as they are getting loads of (barley) used cars into the market, that people will bring back time after time for services.
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